3/6/2023: Stripe is Raising $4B to Pay RSU Tax Bills
Foursquare let the employee RSU expire
According to The Information, Stripe is raising $4B at $50B valuation. Interestingly, the majority of the $4B they are raising is not being used for growth but for paying RSU tax bills for its early employees. It turns out that some of the early employees’ RSUs are expiring but Stripe is not ready to IPO under the current environment. This is a really expensive way to make this work though. I imagine many investors will be reluctant to put in all this money just for the IRS. At the same time, I don’t think Stripe has many other options. Stripe is probably going to do great in the long run so hopefully it’s worth it. On the other hand, Foursquare, a former hot tech startup, reportedly concluded that it couldn't do anything for former employees whose RSUs are set to expire.
I asked ChatGPT how employers can address the issues of expiring RSUs. Here is its answer:
Q: If a company doesn't IPO before the RSU expiration date, what can they do to avoid making the RSUs worthless?
A: If a company does not go public before the RSU expiration date, there are several options they can consider to avoid making the RSUs become worthless:
Extend the expiration date: The company can choose to extend the expiration date of the RSUs, giving employees more time to exercise their options. This may require approval from the company's board of directors and may be subject to certain restrictions.
Offer a cash payout: The company can offer to buy back the RSUs at their current fair market value, even if the company has not gone public. This can provide employees with some value for their RSUs, even if they cannot be exercised as stock options.
Convert the RSUs into other equity: The company may offer to convert the RSUs into other forms of equity, such as preferred stock or membership units. This can allow employees to still receive some form of equity in the company, even if it does not go public.
Negotiate with employees: The company may be able to negotiate with employees to find a mutually agreeable solution, such as offering additional compensation or benefits in lieu of the RSUs.
It is important for the company to communicate clearly with employees and work to find a solution that is fair and equitable for all parties involved.
I suspect that Stripe is doing 3 above and has to help their employees pay the IRS as part of the conversion process. I don’t think this is a preferred way to address the employee RSU expiration though. Companies should just go IPO and let the market set the prices.
Yeah they can just do a direct listing.
Very strange. There must be some type of board /founder conflict on this.
Founders own their shares outright after this?